"The rating is supported by the company’s strong competitive position and unparalleled capitalisation as well as the size and strength of its balance sheet," RAM Ratings said in a statement.

"As the oldest player in the industry, SLIC has amassed unmatched strength in its capitalisation through retained profits."

The previously state-run SLIC was privatized in 2003. It is the largest insurer in balance sheet terms and the company accounted for 45.19 percent of industry assets at the end of December 2006.

RAM Ratings said that SLIC had ample financial flexibility due to its robust balance sheet.

But RAM said disclosure and corporate governance had room to improve and as the company implemented new procedures and sought a stock exchange listing, there could be improvements.

At the end of 2006, the firm had shareholder funds of 8.4 billion rupees which was half of the industry shareholder funds.

Though it had lost its earlier monopoly status, after privatization it was improving its market share.

SLIC had an investment portfolio valued at 30 billion rupees, which was the industry's largest.

RAM said the firm had a "respectable" bottom line, without elaborating.

RAM said the firm had good underwriting capabilities but an "all risk" category coming under the miscellaneous class of insurance had shown a high incidence of claims.

"In the meantime, the company’s life underwriting standards are deemed adequate as they are modelled after those of its international re-insurers, i.e. Munich Re and Swiss Re," the rating agency said.

"The company’s reserving is perceived to be strong. Since FY (financial year) Dec 2006, SLIC has been providing for both life and non-life reserves, as per actuarial recommendations.

"We note that SLIC is also the only insurer that has been able to consistently keep its reserve adequacy ratio above 100 percent in the past 4 years," RAM said.